Food price fall first for 2 years

Press, 16 January 1986, Page 1

Food price fall first for 2 years

Wellington reporter The average level of food prices fell last month, the first time for two years. The food price index dropped 0.6 per cent from November, but was still 12.2 per cent higher than in the previous December.

The index is intended to measure the average level of prices and is worked out on a survey of food items in selected urban areas around New Zealand, once a week in the case of fruit and vegetables and once a month for other food.

Food price inflation has been declining since the middle of last year, largely as a reflection of the lower costs of imports because of the relatively strong New Zealand dollar.

The December fall may be a good sign for general price inflation over the three months to the end of 1985. The latest movement in the consumers’ price index will be made public on Saturday. Private sector economists in Wellington suggested yesterday that the consumers’ price index rise would be closer to 2 per cent. They say there is uncertainty about the impact of interest rates on inflation.

One economist said the food price index fall could indicate that producers were not passing on costs as readily as in the past, and that would be very favourable for general inflation if

it applied to producers of other commodities as well.

The food price index fall was not unexpected. Fruit and vegetables made the largest contribution to the fall.

Other notable decreases in price were on tea, mince, hogget and lamb, canned fruit, margarine and canned and frozen vegetables. Price increases taken into account were on beef and poultry items, apples, and meals away from home. In November, the index increased 0.2 per cent after a nil movement in October. The last fall was of 0.7 per cent in February, 1984. The Minister of Trade and Industry, Mr Caygill, said that last month’s fall was excellent news. He said it was the biggest reduction in food prices since 1974, apart from a month during the price freeze. “Clearly we do not need a general price freeze to break the back of inflation. Rather the Government policies of greater openness and competition are producing the result,” he said. The Opposition spokesman on finance, Mr Birch, said fruit and vegetables traditionally dropped in price at this time with large quantities coming on to the market. He said the fall in the price of fresh meat resulted from a 40 per cent drop in lamb prices paid to farmers.